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Sign Up Underway For CFAP and Ethanol Updates

Update for May 29th, 2020

While many states received cooperative planting weather this spring a few have not, in fact some producers in North Dakota are still harvesting their 2019 crop. Many producers across the U.S. particularly in North Dakota and portions of the eastern Corn Belt have experienced flooded fields and planting delays this spring. With the considerable erosion in prices and the ongoing demand uncertainty, some analysts believe many producers will take preventive plant this season rather than struggle to plant in saturated soils. This week’s USDA crop progress report showed 88% of the U.S. corn crop has been planted vs 82% on average and 55% a year ago:

  • Minnesota is 98% planted vs 88% average

  • Iowa is 97% planted vs 91% average

  • Nebraska 97% completed vs 89% average

  • Illinois is 89% planted vs 82% average

  • Indiana 80% vs 69% average

  • The states of North Dakota, Pennsylvania, Kentucky and Tennessee are still behind their normal pace.

Once again tensions are rising between the U.S. and China and soybeans are bearing the brunt. China was actively buying soybeans this week but instead of purchasing U.S. soybeans to help meet the Phase 1 agreement, they chose to pay up for soybeans out of Brazil, perhaps to make a point? The USDA reported this week that 65% of the U.S. soybean crop is planted vs the average of 55% for this date. Portions of Missouri, North Dakota, Arkansas and Tennessee are running behind normal planting pace at this time, some states running ahead of normal:

  • Iowa is 92% planted vs 64% average

  • Nebraska is 89% planted vs the average of 62%

  • Minnesota 88% planted vs 70% average

  • Indiana 66% planted vs 48% average

  • Illinois 65% planted vs the average of 56%

The Renewable Fuels Association held a media call on May 15th to detail the direct impacts COVID-19 has had on the market. The CEO and president of the RFA, Geoff Cooper explained that the U.S. ethanol industry was producing fuel at an annual rate of 16.5 billion gallons in February, prior to the crisis, but by late April production had fallen to 8.2 billion gallons, the lowest production levels the industry has seen since the ethanol boom in the early 2000’s. Cooper told the media, “There is some good news. It seems that the worst may be behind us. We’re beginning to see some signs of recovery as states begin to ease stay at home restrictions and people begin to return to public spaces and get back out on the roads.” He also noted that “Gasoline demand is beginning to show some signs of life” (up by nearly 46% compared to early April) and regarding ethanol, “It does seem that we are starting to see a light at the end of the tunnel.” “But make no mistake, we have a long way to go to climb out of the hole that COVID-19 has put us in. By our last count there are still more than 60 ethanol plants that are fully idle today and close to 75 or 80 facilities that are still operating at greatly reduced output rates.”

As of May 22nd ethanol production for the week had increased by 9.2% to 724,000 barrels a day compared to the previous week but is still 31.5 % less than a year ago. Ethanol stocks are beginning to slowly decline and are now back down into the upper historical range after falling by 1.9% to 23.176 million barrels (29.4 day supply) Corn used for ethanol is estimated at 73.9 million bushels, to reach the annual target of 4.95 billion bushels we would need to see corn use average 96.7 million bushels per week for the remainder of the crop year. In order to reach these goals we need demand for the product to strengthen and while demand has improved now for the 4th week in a row it is still 31% lower than last year.

Signup for the CFAP has begun. Farmers across the country can now enroll for their share of the $16 billion dollar coronavirus relief package. USDA under secretary Bill Northey told viewers of AgDay Television that while all of the assistance to producers helps it doesn’t come close to bridging the gap. “Sixteen billion is a whole lot of money, right? But you spread that about all across agriculture, you look at the impact out there, and I’ve heard estimates of the impact being at least three times that much, maybe four times that much. We’re really just covering most of the first-quarter loss for those commodities that we’re able to fit into our formulas. We’re not covering second-quarter losses very much. We’re not covering inventory losses. We’re covering none of the 2020 crop that’s going in the ground right now as well. And we all know that’s being impacted.”

The U.S. along with Australia, the U.K and Canada released a joint statement Thursday criticizing China for breaking a pledge made to the western world to allow Hong Kong to remain free from Chinese rule. Hong Kong is home to financial institutions from around the world and is also a vital U.S. trading partner. This situation has markets on edge around the globe and has increased concerns with traders that any tit for tat between the U.S. and China could result in the destruction of the Phase 1 agreement but officials from both sides have stated that the agreement will remain in force.

U.S. commodity markets will begin turning their attention to crop conditions and weather outlooks. The 6 to 10 day outlook from NOAA shows mostly hot and dry conditions across most of the central portion of the country.

We’ve been hearing for several weeks about the possible development of a La Niña weather pattern and according to WeatherTrends 360 there now is no doubt.

The map below shows the temperature difference in the Pacific Ocean and waters off the U.S. Northeast coast compared to this time a year ago. These areas of cool water when combined with other cycles is a major shift that will likely lead to a very active and destructive hurricane season in the U.S. as well as reduced precipitation totals and severe weather outbreaks across the country as we go through the remainder of 2020.

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